The signs indicate that home improvement centers will have another good year despite shortages of materials and rising prices. Since last October, inflation fueled by Covid-19 has caused prices to increase 6.2 percent from the previous year, the highest increase since 1990. Merchandise that consumers could purchase for $94 last year now costs them $100.
While the sting of higher prices is most evident at the gas pump, the discomfort can also be felt in the shelter sector that has seen escalating charges for home-related services performed by general contractors and maintenance service providers. According to Mischa Fisher, chief economist for home services website Angi, “The combined demand for both workers and materials has resulted in inflation across almost every category of home improvement services.”
The report forecasts future Growth in Market
In “The Economy of Everything Home Report,” Angi analyzed home services in the U.S. Consumers spent a total of $595 billion and initiated 728.3 million household projects in 2021. Fisher predicts that the market will continue to grow for various reasons. These include; supply shortages, low-interest rates, rising prices, gains in home equity, shifting demographics, and digital migration. Reviewing the total addressable market (TAM), the report segments the $595 billion market into three categories.
- Home improvement market: $376.9 billion and 148.5 million projects
- Home maintenance market: $157.7 billion and 500.3 million projects
- Home energy repair market: $60.6 billion and 79.5 million projects
Homeowners Invest in Home ImprovementsAlthough independent home improvement retailers need to follow trends in the housing market and new construction, the most significant impact on sales will come from households who own older homes. The report notes that nearly 40 percent of the country’s housing stock is more than 50 years old. Fisher says, “141.5 million housing units is a staggering amount of construction and physical material that undergoes constant wear and tear from both occupants and the environment. How old that space is, how it is used, and who lives major drivers determining the people in need of home services. With boomers aging in place and millennials taking on homeownership, we’re likely to see the demand for home services will continue to rise in the years to come.”
Small retailers Thrive in the Home Maintenance Market
Unlike huge kitchen remodels that require hiring contractors, home maintenance and repair are an ongoing necessity for homeowners. Clogged plumbing, leaky faucets, broken screens, painting, and maintaining lawns come with the territory. With so many people working from home, it’s easy for them to hop in the car and take a quick trip to the local hardware store during the week instead of waiting until the weekend to pick up the merchandise for small DIY projects. According to the report, home maintenance generated about half the revenue ($157.7 billion) of home improvements ($376. 9 billion) yet accounted for three times as many projects. While home improvements are more high-profile and photogenic, home repairs and emergency maintenance are equally important since it is less optional and more urgent.
Strong Housing Market Gains Momentum
According to the Indicator of Remodeling Activity (LIRA), a report generated by the Joint Center for Housing Studies at Harvard University, the strong growth in home improvement and maintenance feels the 9 percent growth rate achieved in the 4th quarter of 2021 will continue into 2022. “Residential remodeling continues to benefit from a strong housing market with elevated home construction and sales activity and immense house price appreciation in markets across the country,” says Carlos Martin, Project Director of the Remodeling Futures Program at the Center.
Abbe Will, Associate Project Director, adds, “With these tailwinds, annual improvement and repair expenditures by homeowners could reach $400 billion by the third quarter of 2022. Yet, several headwinds could still taper the expected growth in remodeling spending including the rising costs of labor and building materials, as well as increasing interest rates.”